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Gold Price Advances Near $1,370

Release Date: 
Friday, February 11, 2011

GOLD PRICE NEWS - The gold price advanced Friday morning as the price of gold rose $4.40 to $1,368 per ounce. Amid heightened political uncertainty in Egypt, demand from global investors for both gold and U.S. dollars is increasing. The gold price moved to the upper end of its trading range at the same time that the U.S. dollar strengthened versus all of its major counterparts, including the euro, yen, and pound.

Silver prices held steady above $30 per pound and oil, as measured by the WTI crude March contract, rose $0.42 to $87.15 per barrel. The price of gold has underperformed the more cyclically-sensitive copper price in recent months, although over the past few days there have been signs that this trend maybe reversing. Copper prices slid $0.03 to $4.51 per pound this morning.

In recent weeks, movements in the gold price have been dictated in part by commentary from various Federal Reserve members on quantitative easing (QE). Fed Chairman Bernanke has stressed the importance of QE in helping to fuel economic growth, while Fed Presidents Fisher and Lacker have stated that it is time to consider ending QE due to improved economic growth and the asset purchase program's potential inflationary consequences.

As for politicians, the most outspoken individual on the folly of QE has been, and continues to be, Congressman Ron Paul. Dr. Paul, a long-time Fed critic as well as a strong proponent of the Austrian School of Economics, has advocated a return to the gold standard. Yesterday, the Texas Congressman held his first hearing as the new chairman of the House Domestic Monetary Policy and Technology Subcommittee. Although no Fed members attended (Dr. Paul cannot force any to come), Dr. Paul led a discussion with various economists and policymakers on what he considers to be the damaging effects of the Fed on the global economy.

Ron Paul, who has been bullish on the gold price for the past decade, followed up yesterday's hearing with a CNBC interview laying out his case against the Fed. He called QE2 a "total failure," noting that it has failed to lower unemployment and has substantially contributed to higher inflation. "We're trying to correct the massive problems we had this decade with more" of the same policies, Congressman Paul contended. Bernanke is "supposed to give us full employment and stable prices and we have neither. How did the Fed do?"

When asked about a return to a gold standard, he acknowledged that while it is his preference, it would need to happen gradually given the inter-connectedness of the global financial system. Nonetheless, he stressed that the changes need to begin as soon as possible to limit any further damage inflicted by the Fed.

Although Congressman Paul's views have attracted a considerably greater following in recent years, the Federal Reserve is likely to remain in charge of monetary policy for the foreseeable future. Paul even acknowledged as much, but warned that it may lead to a "run on the U.S. dollar" because of the Fed's misguided attempts to solve a problem of excessively easy monetary policies with more easy money. While the Fed's policies have already helped the gold price reach new all-time highs, if Paul's predictions come true, the gold price rally may still be in its early stages.

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This article is independently provided by and does not represent the views or opinions of Goldline International, Inc. Although the information in this article has been obtained from sources believed to be reliable, Goldline does not guarĀ­antee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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